Saudi Arabia, Qatar and the United Arab Emirates announced yesterday they are raising their oil prices $6 a barrel. Venezuela announced a comparable increase.
The increases are expected to intensify inflation and retard economic growth all around the world. They are the first step in a complicated new round of oil prices increases that is likely to lift the price of gasline at least 15 cents a gallon by late next year.
The four, regarded as "moderate" members of the Organization of Petroleum Exporting Countries, may have acted to head off even larger increases at the OPEC meeting beginning Monday in Caracas and to try to restore some price discipline within the oil cartel analysts said.
If other oil exporters increase their prices comparably, as expected, but none goes above $30 a barrel, OPEC prices will have risen 115 percent in the course of a year.
Yesterday's increases alone will push up prices of gasoline and other oil products by about 2 1/2 cents a gallon in the United States, oil experts estimated. Assuming that other countries raise their prices comparably, and the cost of uncontrolled U.S. crude also rises, prices at the pump would jump 10 cents a gallon.
The phased decontrol of domestic crude oil prices ordered by President Carter is expected to add another five cents or so to gasoline prices over the course of 1980. Thus the total increase in sight is at least 15 cents a gallon.
The Saudis increased the price of Arabian light crude from $18 to $24 a barrel retroactive to Nov. 1. The UaeY and Qatar, which already had higher prices than the Saudis, raised their prices to $27.56 and $27.42 a barrel, respectively. Venezuela increased the prive of its light crude by $4, but its oil company customers were waiting last night for word on a new price fot its more abundant heavy crude, which was selling for $19.48.
Yesterday's action was regarded by one Carter adminstration oil expert as a sort of "preemptive strike" in advance of the Monday meeting at which prices for 1980 will be considered. As usual, some OPEC countries, including Iran, have been calling for very large increases that would bring the price up to $35 a barrel.
In June, OPEC set its basic price at $1, a barrel but approved "surcharges" up to a total of $23.50. Since then, however, Nigeria, Libya and Algeria, which export about 5 million barrels a day of light crudes much in demand for making gasoline, pegged their prices above $26 a barrel.
Earlier this week, Nigeria told some of its customers it is considering increasing its price to "at least $30" a barrel in January. Should the OPEC ministers agree on a $30 ceiling at the Caracas meeting, which some experts think is possible, it would set a $6 spread between it and the Saudis' $24 floor a situation not unlike the $5.50 spread agreed to in June.
The four countries that acted yesterday have been working as a group to limit increases in official OPEC prices at a time when some crude oil is selling on spot markets for more than $40 a barrel.
"This decision now is an effort to close the enormous gap that exists between them and other OPEC members, and increase chances for unifying prices," said an industry source in Venezuela.
A Carter administration energy official agreed, saying, "This is an effort by the doves to convince the hawks to be more reasonable at the meeting Monday."
Such is the reality of world oil markets that a $6-a-barrel price hike can now be regarded as dovelike, at least in private. Publicly, White House press secretary Jody Powell declared, "We are concerned because of the effect this will have on our own economy and the world economy."
Carter admnistration economists declined to make any estimates of the impact of the oil price increases on inflaton or economc growth until after the OPEC meeting is completed.
Most economic forecasters have been assuming another increase in world oil prices as they cranked out their predictions for 1980, though most have been using figures smaller than the increases that now look likely.
Generally, the increases announced yesterday were seen as confirming their forecast that the economy will drop into a recession in the first half of 1980, as anticipated for some time by many economists.
If the $6 increases under a $30 lid do become general, the United States will be paying at least $20 billion more for imported oil in 1980 than this year, with the total soaring past $80 billion, according to several forecasters.
The increases will agan worsen the U.S. merchandse trade deficit, probably pushing t beyond $30 billion again in 1980 from an estimated $26 billion this year. However, because of large surpluses in transactions in services, earnings of foreign business affiliates with U.S. corporations and so on, the more comprehensive balance on current account is expected to be close to balance.
Word of the latest price hikes jolted world financial markets, with the price of gold hitting a record $457.50 in London and $457 in Zurich. The dollar strengthened slightly in Tokyo, partly because Japan relies on imported oil for most of its energy supply. In Europe, the dollar weakened.
The fact that Saudi Arabia chose to keep its prices about $3.50 below those of the UAE and Qatar, and likely at least that much below those of Kuwait and Iran, means four major U.S. oil companies will continue to enjoy a competitive advantage in world markets.
Exxon, Mobil, Standard Oil Co. of California and Texaco, partners with Saudi Arabia in Aramco, still will be able to buy oil for less than companies with no access to Saudi crude. The companies all say they pass on the savings to U.S. refining affiliates, and have been defending recent surges in their profits as coming from foreign refining and marketing operations.
Angered by those arguments, West German Chancellor Helmut Schmidt yesterday accused American oil companies of pocketing exorbitant profits and making fools of Europeans. "I regard [these] exorbitant profits as provocative," Schmidt told the West German Employers Federation.
Schmidt said the oil companies placated Americans by telling them the growth in profits was achieved abroad, which meant primarily in Europe, and particularly in Germany where selling prices are not controlled. The U.S. companies are "branding us as idiots," the chancellor declared.